Threat of refinery strikes in Italy

Claudio Descalzi, the new chief executive officer of Eni, has told Italian union leaders that the several unprofitable refineries are to be closed. Those most likely to be affected are Gela in Sicily, Taranto in the Puglia region, and Livorno in Tuscany. Together these refineries account for approximately 40% of Eni’s refining capacity in Italy and employ more than 1500 people.

As a result of this announcement, Italy’s unions are threatening to call a general strike on the oil and gas major. They say they are prepared to shut off a strategic pipeline feeding gas from Libya. Representatives from the country’s top three unions will meet next Friday to vote on the strike.

Eni may try to appease workers by offering them jobs elsewhere in the company, and by converting refinery sites to logistics depots or to serve other uses. A refinery at Venice, for example, has already been converted to process biofuels.

However, in order to implement his plan, Descalzi must secure approval from the body that appointed him, the Italian government, which owns a 30% controlling stake in Eni.

Luigi Ulgiati, secretary general of the chemical workers’ division of the General Labour Union, said: “Eni’s strategy could cripple the refinery sector. The government must step in because we risk de-industrialising the country and creating mass unemployment in the name of debatable notion of efficiency”.

Some financial analysts hold a contrary view, suggesting that Descalzi’s proposal is long overdue. Fitch Ratings said this week that Eni could suffer a credit rating downgrade if it fails to turn around its loss-making refinery business.

The company, which has five wholly owned refineries in Italy and one half-owned plant, posted an adjusted net loss of 232 million euros (US$ 316.46 million) last year.

Furthermore, with demand for refined petroleum products falling, the Eni unit that refines crude oil has lost an average of more than 100 million euros, approximately US$ 136 million, each quarter since 2009.

Eni’s competitors face many of the same pressures. European refiners are struggling in the face of weak economies, competition from US refiners and new, more efficient refineries in the Middle East and Asia.